AI Drafter 
TaxTMI 
TaxTMI 
2021 (4) TMI 674
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....n of tax u/s. 195 of the Act on payment made to Georgia Tech Research Corporation towards cost reimbursement for joint Research Projects as Royalty and levy of interest of Rs. 2,31,307/- u/s. 201(1A) of the Act and liable to deduction of tax TDS amounting to Rs. 5,58,040/- on payments made to Georgia Tech Research Corporation. 3. The brief fact of the case is that assessee Pandit Deendayal Petroleum University (PDPU) is a deemed university as per notification of Government of Gujarat. The assessee has entered into two agreements with the Georgia Tech Research Corporation, Georgia, USA for a collaborative joint research project to study permeability of tight gas sandstone. The assessee has made certain payments to Georgia Tech Research Corporation (GTRC) for conducting study related to research project " Permeability Characterization and Modeling of Tight Sandstone Reservoirs" The Assessing Officer was of the view that payment made to GTRC were of the nature of royalty and hence TDS should have been made @ 15% for the sum so remitted. Therefore vide notice dated 13th Nov, 2004, assessee was asked to clarify the nature of these remittances. The contents of the notice issued by ....
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....in an opportunity to raise objection against the said notice." In response to the aforesaid notice, the submission of the assessee is reproduced as under:- 6. In response to the above referred to letter dated 19/12/2014, the assessee made a written submission. Relevant and operative portion of its submission is reproduced here below: "As you are aware that remittances made to Georgia Tech Research Corporation -GTRC, USA is for a collaborative joint research project to study permeability of tight sandstone which is to be utilized by PDPU for educational purpose and therefore the same is specifically excludes from the definition of "Fees for included Services" and remain out of the purview of Pars 5 (c) of article 12 "Royalties and Fees for included Services" of India - USA tax treaty. The same is explained in detailed by our letter dated 12-11-2014 Now sir, as you came to know that remittances to GTRC are specifically excludes from the definition of "Fees for included Services" and remain out of the purview of Para S (c) of article 12 "Royalties and Fees for included Services" of India - USA tax treaty, you have conveniently decided to change y....
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....ge, experience or skill; (V) (iva) the use or right to use any industrial, commercial or scientific equipment but not including the amounts referred to in section 44BB;] (VI) (V) the transfer of all or any rights (including the granting of a licence) in respect of any copyright, literary, artistic or scientific work including films or video tapes for use in connection with television or tapes for use in connection with radio broadcasting, but not including consideration for the sale, distribution or exhibition of cinematographic films; or (VII) (VI) the rendering of any services in connection with the activities referred to in sub-clauses (i) to-(iv), (iva) and] (v)." Sir, we request you to kindly let us know under which of the above para, sub para/clause, sub clause of the definition of term "Royalty" as per DTAA and as per the Income Tax Act the payment made to Georgia Tech Research Corporation, USA is liable to tax in India. On hearing from you we will be pleased submit our detailed reply on the same. Your early action in the matter is solicited." In its reply, the assessee has explained that payment was made to George Tech Research Corpora....
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....orted by the Assessing Officer. 5. During the course of appellate proceedings before us, the ld. counsel has submitted that during the course of assessment proceedings, the assessee has furnished copy of detailed agreement executed between assessee and Georgia Tech Research University and gone through the different clauses of the agreement stating that nowhere it is provided that payment is made for acquiring intellectual property by the assessee from GTRC. The ld. counsel has taken us to the different pages of the paper book pertaining to agreement and copy of invoices pointing out payments made to GTRC are not in the nature of royalties but are in the nature of cost reimbursement of joint research project and also referred judicial pronouncements in the case of CIT vs. Dunlop Rubber Company Ltd. of Hon'ble Calcutta High Court 10 taxman 179 (Cal) and High Court of Gujarat in the case of CIT vs. Creative Infocity 82 taxman.com 356 (Gujarat). On the other hand, ld. Departmental Representative has relied on the order of Assessing Officer and ld. CIT(A). 6. Heard both the sides and perused the material on record. The assessee has made certain payments to the Georgia Tech Researc....
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....in connection with the activities referred to in sub-clauses (i) to [(iv), (iva) and ](v)" We have also gone through the clause 3 of article 12 of the DTAA between India and USA wherein the term royalty is defined as under:- "3. The term "royalties" as used in this Article means; (a) Payments of any kind received as a consideration for the use of, or the right to use, any copyright of a literary, artistic, or scientific work, including cinematograph films or work on film, tape, or other means of reproduction for use in connection with radio or television broadcasting, any patent, trade mark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience, including gains derived from the alienation of any such right or property which are contingent on the productivity, use, or disposition thereof; and (b) Payments of any kind received as consideration for the use of, or the right to use, any industrial, commercial, or scientific equipment, other than payments derived by an enterprise described in paragraph 1 of Article 8 (Shipping and Air Transport) from activities described in paragraph 2....